Bookkeeping
Accrual vs cash basis
Accrual vs cash basis compares two accounting methods: accrual records income and expenses when earned or incurred, while cash records them when money actually moves.
Under cash basis accounting, you record income when you receive payment and expenses when you pay them. Under accrual accounting, you record income when you earn it and expenses when you incur them, even if cash moves later. Accrual uses accounts receivable and accounts payable to track what is owed.
The method changes your reports and can affect your taxes. Cash basis is simpler. Accrual gives a fuller picture of profit over time. Rules on who may use which method vary, so confirm the choice with your CPA. This entry gives general information, not tax advice.
Our accrual vs cash basis guide explains more. See also the profit and loss statement and our bookkeeping services. Whichever method you pick, use it the same way every period so your reports stay comparable.
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